Italian PM Letta faces Senate showdown as Berlusconi party splits
* Revolt in Berlusconi party offers hope to Letta in confidence vote
* PM appeals for support to avert "fatal" risk
* Centre-right in disarray after ministers back Letta
By James Mackenzie
ROME, Oct 2 (Reuters) - Prime Minister Enrico Letta warned on Wednesday that Italy risked being left without a stable government if he loses a confidence vote triggered by Silvio Berlusconi's move to pull his centre-right party out of the coalition.
However, the media tycoon's furious decision on Saturday to withdraw his ministers from the government has provoked a revolt in his People of Freedom (PDL) party that could see dozens of Senators defy orders and vote for the government.
Estimates of how many will do so vary widely. PDL Senator Roberto Formigoni said on Wednesday that 25 rebels were ready to form a new group, whereas on Tuesday members of the dissident camp had given forecasts as high as 40.
Letta issued his warning after a week of political drama as the fragile accord that held his unwieldy coalition of left and right together broke apart over moves to expel Berlusconi from parliament following his conviction for tax fraud.
"Italy is running a risk that could be fatal, without remedy. Thwarting this risk, to seize or not seize the moment, depends on the choices we will make in this chamber. It depends on a yes or a no," he told the Senate.
For Letta, whose centre-left Democratic Party (PD) has a strong majority in the lower house, the vote in the 315-seat Senate will be decisive. A vote is expected in the early afternoon after a debate by Senators.
He can count on at least 138 votes from the PD and centrist parties, but to be sure of winning he would need at least another 20 votes for a majority.
Late on Tuesday, Letta told the five centre-right ministers ordered by Berlusconi to quit the government that he would not accept their resignations, a sign of confidence and an invitation to other moderates to support him in the vote.
He said the government would continue with tight control over public finances and a focused programme of economic reforms and said it was vital that Italy had a stable government in 2014 when it assumes the rotating presidency of the European Union.
Financial markets have responded positively to signs that defectors from the centre-right would guarantee the survival of the government and avert the uncertainty of new elections.
The revolt in Berlusconi's party has been a watershed moment for the 77-year-old, the undisputed leader of the centre-right for two decades. It opens an unpredictable new chapter in Italian politics.
Angelino Alfano, the 42-year-old PDL party secretary once seen as Berlusconi's heir, finally broke with his patron and called on the party to support the Letta government from which he himself had resigned as interior minister on Saturday.
Whether he succeeds in attracting a sufficient number of other centre-right moderates to create a durable movement separate from the PDL, increasingly dominated by hardline Berlusconi loyalists, remains to be seen.
But the bitterness in the Berlusconi camp at the defections was underlined by a stark headline in the family-owned Il Giornale daily reading "Alfano betrays".
An opinion poll by the Ipsos institute conducted on Tuesday showed 61 percent of PDL voters felt the party should back Letta and 51 percent that it should pick a new leader to take over from Berlusconi and renew the party.
Even if Letta's government survives the vote, there is no certainty that it will be capable of the kind of deep reforms or painful tax and budget measures needed to reverse a decade of economic stagnation and cut its 2 trillion euro ($2.7 trillion)public debt.
But with memories fresh of the chaos that helped to bring the euro zone close to collapse before the last Berlusconi government fell in 2011, the turmoil in Italy has been closely watched by Rome's international partners.
On financial markets Italy's borrowing costs have risen markedly. With the European Central Bank pledging to support euro zone bonds, however, there has been no sign of the panic seen at earlier crisis points.
The main barometer of market concern, the premium investors demand to hold Italian 10-year government bonds over AAA-rated German Bunds, has fallen from more than 300 basis points at the start of the week to 266 points on Wednesday.
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